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Moody's may downgrade MeriStar
Moody's Investors Service said it placed MeriStar Hospitality Corp.'s B2 senior unsecured debt and Caa1 convertible debt ratings under review for possible downgrade following the announcement that MeriStar is being acquired by an affiliate of The Blackstone Group in a transaction valued at $2.6 billion.
The affiliate of The Blackstone Group has obtained a commitment from its parent for $800 million in equity financing, while about $1.9 billion in secured debt commitments has been provided by three bank lenders.
The review reflects the agency's concern that MeriStar's capital structure would be more highly levered and contain significant amount of secured debt following the acquisition of the REIT by an affiliate of The Blackstone Group.
Moody's said its review will focus on the use of debt, especially secured debt, to fund this transaction and the ultimate capitalization of MeriStar.
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